NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Wednesday, April 8, 2015

That Narendra Modi is a skilful orator is not news, but to hear him in person and to see him use ground-level common sense to drive home financial lessons to an auditorium full of bankers is quite an experience. The venue was the 80th birthday party of the Reserve Bank of India (RBI) at the National Centre for Performing Arts in Mumbai. And in case you were wondering, as I did, as to why celebrate 80 years rather than the global norm of 75 or 100, Modi said that 80 years is special to Indians because it marks the sahastra darshan or the 1,000 viewings of the full moon by a person who turns 80.

The Prime Minister started off by admitting that most of the conversation relating to finance goes over his head—since he’s not endowed with the needed “software” to understand it. But then he went on to demonstrate that jargon is not what is needed and that a commonsensical practical world view does just as well—in fact, better. What struck me were three lessons, two of which could have been out of a financial planning text book and the third is still to be written into financial sector regulation—but it will be.

Lesson one: goal setting. Modi wants the RBI to set a goal to get India fully financially included by the time it hits 100 in 2035. A goal that is so far away, like retirement planning, has the ability to get ignored. So financial planning 101 says, break up the goal into smaller bits, and pace yourself. Modi’s roadmap for RBI is to set event-based goalposts over the next 20 years—2019 marks Mahatma Gandhi’s 150th birth anniversary; 2022 is India’s 75th independence anniversary; and in 2025, RBI turns 90.

Lesson two: habit creation. He said that his aim is not to make financial inclusion a “programme” but to make it a swabhav—that loosely translates into the word “habit”. Financial planning is all about inculcating good money habits. Unless you make looking after your money life a habit, hands-free money management will not happen.